Damaged or outdated stock can lower the inventory value a buyer accepts. Before selling your business, review the quantities and values in your inventory records and agree on which items the buyer will pay for.
A physical count gives you a starting point. The buyer will also need to understand the stock's condition and whether the business owns it. Those questions can affect what the buyer accepts and the amount they're willing to pay.
Review questionable stock before negotiations begin so you have time to investigate.
Check what the count includes
An inventory report can contain damaged goods alongside stock that sells regularly. Customer returns may need inspection before anyone knows whether they can be sold again. Materials held for someone else raise a separate ownership question.
Identify these categories so the buyer can see what each inventory total represents. Keep condition and ownership separate in the records. An item can be in good condition without belonging to the business.
Slow-moving stock needs a closer look, too. A long time on the shelf doesn't automatically make an item worthless. Check whether it's needed for ongoing work or tied to a customer order before deciding how to value it for the sale.
Explain why stock is being held
Purchase dates and recent sales help show how long inventory has been sitting. Usage records can explain materials that support operations but don't appear as individual sales.
For stock used infrequently, record what it's needed for and when it was last used. That gives someone outside the business a way to judge whether keeping it makes sense. An owner's expectation that an item will eventually sell gives the buyer little to check without sales records or customer orders.
If stock is reserved for a customer, check whether the order can be canceled and whether the customer must buy the full quantity. Keep expected future orders separate from orders already placed when discussing value.
Match the shelves to the records
Missing goods and incorrectly recorded shipments can both cause differences in inventory totals. Investigate the cause before adjusting the records, so the buyer can see why the figures changed.
Keep a record of the count date and how differences were resolved. Track goods received or shipped around that date so the same items aren't counted twice or missed. Include returns and transfers between locations in that review.
Ask the business's accountant to review how inventory values are calculated and any proposed reductions. Deciding that stock will be hard to sell doesn't settle how that change should appear in the accounts or affect taxes.
Define inventory in the sale terms
An asking price leaves room for disagreement if the parties haven't defined the inventory included. A seller may assume all stock listed in the records transfers at its recorded value, while a buyer may question particular items.
The proposed terms should identify the types of stock included and explain how they'll be valued. They also need to establish the date for measuring inventory and how disputed stock will be handled.
Clarify whether inventory is included in the stated price or charged separately. Some deals adjust the price using inventory and other short-term assets, such as unpaid customer invoices, minus agreed amounts the business owes. Have the attorney and accountant check that the agreement spells out what counts and how the price adjustment will be calculated.
Decide what to do with questionable stock
Supplier return terms may offer a way to recover value from stock the business no longer needs. Other items may still be usable or sellable, depending on their condition and demand. Before discarding stock with no remaining use, check local waste rules and special handling rules for those materials.
Compare the cost and consequences of each available option. Selling stock at a discount can free space, but removing materials needed for ongoing work can interrupt service or force you to buy replacements during the sale.
Keep supplier credits or disposal receipts with the inventory records, and have the accountant record any change in value.
Make exceptions easy to review
A current inventory report gives the buyer a basis for checking the seller's figures. Provide a record showing how differences between the physical count and accounting records were resolved, along with an explanation of how inventory is valued. List questionable items separately so the buyer can see their quantities and recorded values.
State any limits on the review. If condition hasn't been checked, say so. Identify stock with unresolved ownership and arrange a specialist's inspection where it's needed.
When a buyer proposes a price reduction for particular stock, ask which items are in question and what supports the proposed value. Keep the supporting records accessible so both sides can check an explanation without repeating the entire inventory review. Leave unresolved items on the list until both sides agree on whether they're included and at what value.
Plan the closing count
Business activity continues while a sale is being negotiated, so an earlier count can become outdated. Agree on who will conduct the closing count and who can observe it. Establish which records will be used to check quantities.
The process also needs to account for stock moving during the count. Goods received that morning or shipped before ownership transfers can otherwise cause confusion about what the buyer is getting.
Have the attorney document how either party can raise a discrepancy and the deadlines for resolving it. Before closing, update the inventory records for goods received or removed since the earlier count and list any items still awaiting agreement.